Carbon Credit Trading Scheme - An Overview
On June 26, 2023, the Ministry of Environment, Forests, and Climate Change introduced the draft Green Credit Programme Implementation Rules. Shortly after, on June 28, the Ministry of Power unveiled the Carbon Credit Trading Scheme 2023. These initiatives emphasize the importance of addressing climate change and using market-based approaches to achieve emission reduction goals.
The Bureau of Energy Efficiency (BEE), under the Ministry of Power, is spearheading efforts to reduce greenhouse gas (GHG) emissions. Through the Carbon Credit Trading Scheme, each ton of carbon dioxide reduced or avoided is assigned a value, known as a carbon credit. This creates a platform for buying, selling, and trading these credits, supporting the country’s climate goals.
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How Carbon Credit Trading Scheme is Ideal for Businesses
As industrialization grows, it's crucial for businesses to take greenhouse gas (GHG) emissions seriously and act responsibly. By participating in efforts to reduce emissions, businesses can play a key role in addressing environmental challenges.
The Carbon Credit Trading Scheme 2023 allows businesses to trade carbon credits, which represent tons of carbon or carbon dioxide reduced. These credits are awarded to businesses or countries that successfully lower their GHG emissions. They can then be traded in the international market at the current market price, making businesses an important part of global emission control efforts.
Advantages of the Indian Carbon Trading Scheme
1. It allows businesses to pool their emission reduction efforts.
2. It allows for the generation of carbon credits and the sharing of benefits.
3. Pricing of the Greenhouse Gas Emissions.
4. A carbon credit certificate shall be granted to sustainable project operators.
5. Businesses that emit GHG will need to purchase carbon credit certificates.
6. It promotes the usage of renewable energy and enhances energy transition efforts.
7. It adds to a sustainable and prosperous future.
Ways to Generate Carbon Credits in India
Have a look at the significant ways to generate carbon credits in India –
1. Renewable Energy Projects
2. Energy Efficiency Measures
3. Waste-to-energy Projects
4. Plan Vivo Standard
5. Direct Seeded Rice
6. Mulching
7. No-till or Conservation Tillage
8. Crop Rotation
9. Cover Crops
Procedures for the Operations of the Indian Carbon Market
Under the Carbon Credit Scheme, the National Steering Committee for the Indian Carbon Market and other authorities will develop detailed procedures for its operation. These procedures will guide how the Indian Carbon Market functions according to the scheme. Below are the key elements that shall be part of these operational procedures:
1. Issuance Criteria
A specific criterion for issuance of carbon credit certificates.
2. Certificate Validity
The validity of a carbon credit certificate is defined by the National Steering Committee.
3. Price Determination
The price of the Carbon Credit Certificates shall also be determined.
4. Submission Guidelines
Must specify the list of requirements, format, and timeline for submission.
5. Monitoring & Reporting Rules
Rules on monitoring, reporting, and verification must be categorically mentioned.
6. Power Exchanges
Power exchanges will take place for the trading of carbon credit certificates.
7. Functioning of Power Exchanges
After getting a green signal from the Central Electricity Regulatory Commission, power exchanges become operational.
8. Constitution of Technical Committees
The Bureau of Energy Efficiency needs to proceed with forming numerous technical committees to address areas of carbon credit trading compliance.
9. Accreditation of the Carbon Verification Agency
The Bureau and the National Steering Committee must make rules for the accreditation of the carbon verification agency.
Top Industries that Prefer Carbon Credit Trading Schemes
Applicability of Carbon Credit Schemes in Industries
1. Energy & Utilities industries are major emitters of greenhouse and seek to offset their emissions through carbon credits.
2. Manufacturing industries, such as steel, cement, and chemicals, engage in carbon trading to fulfil regulatory requirements.
3. Transportation industries like airlines and logistics.
4. Real estate and construction industries get involved in carbon credit trading to enhance their market appeal.
Top Carbon Credit Trading Companies in India
1. Jindal Vijayanagar Steel
2. Powerguda in Andhra Pradesh
3. Handi Forest in Madhya Pradesh
4. Torrent Power AEC
Implication of Tax of Carbon Credits Under Indian Indirect Tax
The implications of tax of carbon credits under Indian Indirect Tax are as follows:
1. Government Notification
Carbon credits are considered goods under the Securities Contract (Regulation) Act.
2. GST Rate Determination
The GST rate involving carbon credits is placed under the 18% GST bracket post.
3. GST on Export of Carbon Credits
Transactions involving the export of carbon credits are exempt from GST.
Compliance Mechanism Under Carbon Credit Trading Scheme
The Compliance Mechanism under Carbon Credit Trading Scheme for carbon credit trading is as follows:
Carbon Credit Trading Scheme Feature
1. The Ministry of Power will decide which businesses fall under the compliance mechanisms based on recommendations from the Bureau of Energy Efficiency (BEE).
2. The Bureau will study the businesses and accordingly set the emission reduction targets.
3. The Ministry of Power will accordingly recommend GHG emission intensity targets.
4. Businesses must fulfil the GHG emission targets set by the concerned Ministry.
5. Obligated businesses must also meet other targets, such as non-fossil energy use, as notified by the Ministry of Power.
6. Carbon credit certificates will be granted to those businesses that exceed their emission targets.
7. A penalty shall be imposed on businesses that fail to meet their targets.
Governing Bodies Under Carbon Credit Schemes
The governing bodies under the Carbon Credit Schemes are as follows:
1. National Steering Committee
The National Steering Committee will oversee the functioning of the ICM. Such as it will recommend to the Bureau for the formulation and finalization of the ICM.
2. Bureau of Energy Efficiency
It shall play the role of an administrator under the Carbon Credit Trading Scheme, such as granting Carbon Credit Certificates.
3. Grid Controller of India
It is a registry operator, that shall manage and operate the Indian Carbon Market (ICM), such as enabling the registration of businesses.
4. Central Electricity Regulatory Commission
It is a regulator for trading activities under the Indian Carbon Market (ICM); it takes corrective measures to prevent fraud or mistrust.
Features of Carbon Credit Trading Scheme 2023
Have a look at the features of the Carbon Credit Trading Scheme 2023:
Key Features
1. A carbon credit represents a permit to emit one ton of carbon dioxide.
2. Carbon credits are traded on power exchanges registered with the Central Electricity Regulatory Commission (CERC).
3. Non-obligated Entities (Individuals and Companies) can voluntarily participate in the Carbon Credit Trading Scheme 2023.
4. Non-obligated Entities can register projects to track as well as certify greenhouse gas emissions reduction.
Other Features
1. ntities that fail to meet their targets should compensate by purchasing carbon credit certificates.
2. The CCTS began implementation in 2023 and is set to be fully operational by 2025-26.
3. The CCTS includes both compliance and voluntary sectors.
4. The Green Credit Programme is a voluntary market that strives to incentivize environmentally conscious practices.
Compliance-Based Vs Voluntary Carbon Credit Trading
Let’s look into the difference between compliance-based vs voluntary credit trading:
| S. No |
Asset |
Compliance-Based Carbon Credit Trading |
Voluntary Carbon Credit Trading |
| 1. |
Regulation |
Governed by a regulatory body |
Voluntary Participation |
| 2. |
Emission Limits |
Specific limits set for each company |
No imposed limits on emissions |
| 3. |
Carbon Credit Purchase |
Required for exceeding emission limits |
Companies can voluntarily choose to buy credits |
| 4. |
Selling Carbon Credits |
Companies below the emission limit can sell |
Companies can sell carbon credits if purchased |
Why Should I Care About Carbon Credit Market?
If you are an aspiring entrepreneur, you must care about the carbon credit market because of the potentially lucrative business model as given below:
1. Project Development: Initiate projects that remove or prevent carbon emissions and sell the reductions as carbon credits.
2. Baseline Emission Assessment Agency: Establish an agency to assess emissions for project developers in exchange for a fee or a share of carbon credit sales.
3. Verification Consultant: Provide assistance to project developers in reviewing necessary documents.
4. Independent Validation Body: Form a body to conduct independent audits of projects to ensure compliance with standards.
5. Carbon Credit Marketplace: Create a platform or brokering service to facilitate the buying and selling of carbon credits.
Reason to Trust Fastzeal Consultants for Carbon Trading in India
1. 70% Market Control
We are dominating the industry with 70% market control in consulting for carbon trading in India. We are well-versed with the Carbon Credit Trading Scheme 2023.
2. 99% Success Rate
With a proven track record of a 99% success rate in consulting for carbon trading in India, we are the first choice in the segment.
3. Trading of 15 Million+ Carbon Credits
Our experience in trading 15 million+ carbon credits demonstrates our expertise and potential in the space of carbon credit schemes.
4. Comprehensive Market Analysis
Our in-depth reports cover emerging trends, enabling clients to capitalize on a bucket of new opportunities and eliminate potential pitfalls.
5. Risk Management Expertise
Our risk assessment methodologies in the context of carbon credit schemes have helped clients mitigate financial exposure, reducing potential losses by up to 25%.
6. Tie-up with Regulatory Bodies
We have joined hands with regulatory bodies to provide you with expert advisory and consulting solutions on carbon trading schemes.
7. Market Insights
Get market insights into carbon trading in India to understand the challenges in the segment and come up with appropriate solutions.
8. Sustainability Reporting
Our services include end-to-end sustainability reporting, enhancing corporate reputation and pulling the attention of investors.
9. Access to Global Networks
Our established partnerships with international stakeholders will help you get access to global networks. Be ready for collaborative opportunities with industry leaders.
Frequently Asked Questions:
A carbon trading scheme is concerned with regulations for carbon marketplace in order to buy and sell credits that allow companies or other parties to emit one ton of carbon dioxide.
Yes, carbon trading is legal in India, it is regulated under the Carbon Credit Trading Scheme. The primary objective of the scheme is to entails and reduced the GHG emission intensity by the obligated entities.
Yes, you can make money from carbon trading by selling the carbon credits that the entities have earned on reducing the carbon emissions below set limits.
Carbon credit trading is important because it promotes a sustainable future by facilitating businesses to reduce carbon dioxide emissions, providing credit in return.
The governing bodies under Carbon Credit trading Scheme are national Steering Committee, Bureau of Energy Efficiency, Grid Controller of India, Central Electricity Regulatory Commission and Ministry of Power.
The obligated entities are the one whom the Ministry of Power will select to participate in carbon Credit Trading. They will accordingly choose the industries that must meet the carbon credit target and must follow as pet the Carbon Trading Scheme.
The two types of carbon trading are voluntary emissions reduction (VER) and certified emission reduction (CER).
Both businesses and individuals can purchase carbon credits or offsets through voluntary markets.
Dr Richard Sandor was recognized as the father of carbon Trading by TIME magazine.
A carbon tax is a type of penalty that businesses or entities must pay for excessive greenhouse gas emissions.
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